counterproductive. .. counterproductive. so, you know, in terms of solutions -- and i'm very open to the criticism and the potential of making it stronger. so i'm glad to hear your testimony. mr. winstanley, you mention ed - >> yes, sir. >> you mentioned the e-flex coalition that advocates for greater flexibility and options within the law. i understand that the restaurant industry has a unique makeup. what proposal does the coalition have to provide flexibility while upholding the law's goal of expanding insurance coverage i don't -- where do you see that?

>> okay. i was referencing the regulation. >> i'm not familiar with about three i'm not familiar enough to speak to that. what i would like to speak to is you mentioned social security, to my generation and every generation behind us, what social security is known for his being a completely unsustainable program. i would also like to mention that we -- you and i got started with a 24 hour diner and had about ten or 12 employee and we spent all night turning it into a real business and there was nothing more we wanted them to build our business and added to it and i've been fortunate to have good advice from people over the years that have done similar things and what they have shared with me time and time again that turned out to be true in our case is every next step you take it harder than the step behind you and there is significant growth that comes trying to build a real business.

the 50 employees regardless what industry you are in, it presents an additional significant hurdle for people who are trying to build something meaningful and i think it is counter to the spirit of the country. >> thank you. a gentle man's time has expired. we wanted to ask a follow-up question. >> thank you mr. chairman. just a few short questions. health care law requires you to inform your employees about the choices available to them. is this an additional burden expense for the companies? >> we are required to inform about the health care. yes there's a significant amount of education that goes on and it's as anybody with kids knows it's hard to educat harder to ey that isn't interested in hearing what you have to say. you know what has traditionally

been very challenging for us to educate to the groups of people that we were able to provide health insurance to so i see that as being very significant. >> when i was back in the district last weekend, i had dinner at a restaurant and the waitress came over and recognized me, a big supporter and told me her story that she lost her job and was working two jobs because of the health care that she lost when they found out about this employer mandate before they believe that, right clicks and they had to reduce their employees and now she's working two jobs. do you have other people on your staff that are working two jobs? >> we have a significant number of people doing that and what we have seen is there are a lot of people who need part-time jobs come and that is because the wage and job growth in the permanent positions hasn't been there while the cost of housing

continues to increase. >> is that largely attributed to the unaffordable -- excuse me, affordable -- it's confusing. unaffordable health care act? >> i think it is attributable to the act that is very much influencing. >> ms. baker, under the rule it is a collection of two or more corporations with ownership that are connected and one of several ways. many small businesses don't issue stock. how would the rules be applied in that case? >> they look at ownership so if you are not a corporation they look at assessment and equity within the companies. in my example when i invested in a small woman's pity as an investment, i don't manage or operate that on a day-to-day basis. so the employees are then pulled into the firm as part of the rules of aggregation and

increasing the cost. and even though mr. payne mentioned the norm i think the norm is we would love to provide health insurance in every industry that that's a very small women's boutique. there's very few others that would have to require health insurance because they are small businesses and they are not making the employees. so, for me to have to provide health insurance for them makes me not competitive enough market just because i'm in a jupiter and owned businesses in different industries -- i am an entrepreneur and owned businesses in different industries. >> higher deductibles, high premiums, additional legal cost, correct? tens of thousands of dollars per small business. and your less competitive. thank you very much. at this point we will call the hearing to a close and want to thank all of the essays for

being here today. it's very timely. i think what some people do forget is even the employer mandate, the penalty portion has been relayed a year the calculations as to whether or not you will have to comply start in three weeks time. so january 1, that first beginning of what will be 12 monthly buckets of keeping track of the hours and the employees to see if you fit or not. so it is a very timely situation. we have certainly heard a lot of give and take i think. we all recognize that there will be changes that will be needed in this law. and hopefully now the president was agreed to make some changes. he has not been told this point in time recognized that. but i think an overwhelming number of americans today are expressing displeasure in the law. certainly come as we heard today, compliance with the law

and the application of the complex aggregation rules is confusing for business. and i think it almost goes without saying that the big government, one-size-fits-all set of regulations and the law that tel although business what benefits they have to offer what abouwhether that's a restaurant, manufacturing company is in fact a drag on the economy. today's hearing highlighted another example of the unintended consequences of the affordable care act mainly the business of high during the cpa or other tax advisor on the aggregation rules. money that is better spent on the growth and the creation of jobs. in the committee we will continue to closely follow the implementation and its effect on small business. i would ask unanimous consent that members have five days to submit statements and supporting materials for the record.

>> before we close i would like to thank all of the witnesses and it's kind of a breath of fresh air to hear that we are talking about fixing and looking at ways we could improve the implementation of healthcare so it is great to know finally that we are moving on repealing obamacare to finding the common ground to make it work because that is the law of the land. >> thank you ranking member. with that, the hearing is now adjourned.

[inaudible conversations] [inaudible conversations] news this morning that the u.s. economy added 203,000 jobs last month and the unemployment rate and fell to 7% and is the lowest in about five years and exceeds analysts prediction. releasing figures earlier today

and reaction from capitol hill house speaker john boehner issued a statement saying today's report includes signs that should discourage calls for more emergency government stimulus. instead what are you coburn economy needs is to get government out of the way. senate majority leader harry reid as we continue to gather steam now is not the time for washington to put on the brakes. the actions we take could make the difference between getting a job were not. yesterday randy weingarten in the head of the american federation of teachers spoke with reporters at the christian science monitor. here is a bit of what she had to say. >> today is like the day after pizza they. so i'm sure that most of you filed some stories about pisa and the sky falling in things like that although i haven't actually seen much of that. actually, a lot of really good

reporting under the numbers and i just want to thank all of you for that. and, you know, we have been through this before. this is the third or fourth time, the fourth time in my memory, but the fourth or the fifth time that pisa results have invested in the united states. but what does this say that the united states is pretty much in the middle of the pack on mathematics, science and english and particularly this year where there was a focus on mathematics for the first time in ten years. it says two or three things. number one, it says that things like poverty, social economics really matter because you look at the states like massachusetts and connecticut that did well

and what they've done and you look at the data when you pull it out and try to account poverty and you see where the statistics are. but there's more to this because if you just stop there, you are in the same debate that we have been for the last 20 years because the issue is not whether the poverty matters but what do we do about it? so the dominant strategy, educational strategy that we have done for the last ten years is no child left behind in race to the top. that's been the dominant strategy and there have been a bunch of other things like charters and competition and now new standards. but that is the hyper testing sanctioning of teachers and the closing schools what we have learned from the last results is

that strategy is not what works to move the needle it's not what works to move the needle. so you start looking at what do the other countries do that actually the ones that outlast us. to the places i've been here and love and adore but the united states is different but we have to look at some of the things that they've done can we adapt that here. we actually have this, the countries that outcompete us and deeply respect and value the public education you have a

caution flag saying that to my friends at the examiner they have a big caution flag about -- though competent person to look at. the increased poverty in the countries like chile at the dominant education theory. number two, it says a lot about preparing teachers, supporting teachers, giving them time to collaborate and as tom friedman had said in shanghai parents are really engaged and they are really engaged and not just told what to do but they are really engaged. number four, the common core matters, but if it's done the right way but it really was implemented well and you see

this in the countries that outcompete us. poverty does matter, but we needed to lead with equity investments and equity strategies in order to address that -- >> american federation of teachers president randi weingarten you can see tomorrow evening at nine eastern and 1215 eastern time. time. apply now for the alliance for health reform as a cohost a discussion with aarp on admission policies for medicare patients in hospitals. the panel will explore what happens when patients are not admitted to a hospital and instead are given an observation status. it means hundreds of thousands of additional out-of-pocket expenses. this is life coverage on c-span2. >> i'm with the alliance for health care reform and on behalf of senator rockefeller and the board of directors i want to welcome you to the program today on what is a relatively unknown

part of medicare, patients who are in the hospital but not admitted to the hospital. instead they are given what's called observation status. that decision may have substantial financial indications for both medicare beneficiaries and hospitals themselves. maybe even some clinical impacts. and we have some true experts including the co- moderator today that are going to lay out these issues in detail. let me just say that both patients and hospitals find the current situation precarious and cms finds itself trying to find a workable and affordable solution. meanwhile, the use of observation status has grown substantially in recent years. and i just should say in this room a week from today we are going to be giving a briefing

that we were just talking about on the cost containment plans that might be of help and bending the cost care curve. i'm not going to be there because i'm going to be in a hospital whether i am admitted to a hospital, i don't know. the doctor tells me i'm going to stay one night and i'm coming out of surgery. so i will tell you the next time you are here whether or not this discussion helped me in the course of my brush with the healthcare system. we raised it that way so there would be some first-hand experience to get back to you. we are very pleased to have as our partner in today's program the public policy institute of aarp, an organization you may have heard of, but the institute itself has been around for 25 years or more, turning out

reliable evidence-based research on policy issues affecting people and we are lucky to have as a co- moderator today susan lang harsuzannelionheart who ise president at aarp, she direct the public policy institute and also serves as the chief strategist as the champion to nursing in america which is housed at aarp. she is a sociologist and a veteran and i'm pleased to say of several alliance panels and we are glad to have you back. >> thanks so much. talk about up close and personal. you will have to tell me where you are going so i can make sure they are on their best behavior when you are there. we did organize this just for you so you know the main question when you go in is am i an inpatient or outpatient. at the public policy institute we have been really anxious to have the paper released for a couple of years now.

i had a couple of our team members have been really thinking about this and looking at the data that keeps in particular with his colleagues on the paper because we know what an important issue it is. so i wanted to just talk about the title and ie in the hospital or not because i was thinking about it last night about that that really is the patient's perspective and i in the hospital or not. from the public policy perspective it is am i -- is this person part a or b. are they inpatient or outpatient, are they a long-term observation status person or short term inpatient hospital person? as a sociologist at kind of blows you away all of the different categories that you could be that from the patient's perspective, they think they are in the hospital and we will get more into that from the consumer perspective but i thought i would start off with a bit of a

story about a month ago i was in reno to give a presentation to the nurses actually and one of them said would you like to see my hospital in nevada. anybody know about that? and i've never been to the critical access hospital so she said how many bags do you think we have and i am a jersey girl, so it would be maybe 40. for hospital beds and then she proudly shows me that for hospital beds and the one observation there's an observation that if you tell you the truth looks just like the others so it's kind of an interesting thing i shared my report and she was kind of interested that we wouldn't do that. so i'm going to set the stage a little bit what is observation status and i expect since you are in this room you do know something about this and that you do have an interest in it.

but just to set the stage, observation is a status that has been around for a while. this is not a new category. it has apparently started with heart attack. i was looking at a little bit of history and the idea is that when someone comes into an emergency room, the physicians and other clinicians are trying to determine what is going on here and when it isn't really particularly obvious that this person is h., patient for example to be admitted that they have chest pain were you see somebody has a fainting spell, dizziness, it could mean more work on it could mean the rd -- rated. there is a concussion, different kind of stomach problems. is this going to be appendicitis, it' if such of the flu, what's going on here? so somebody coming in with those kind of symptoms are observation patients and it makes sense you wouldn't want to send them right out. you would want to observe them

for a little while. it started with chest pain. so what has been happening is how long can you be observed. it seems to be going further and you will hear more so where are these observation status patients? where are they? most of them there from the emergency room. the observation status doesn't really refer to the expert can say this to a particular setting it as a status, but typically the experience that someone is coming from an emergency room and is either stating in the emergency room so they could be on the gurney in a hallway or move to an inpatient bed so clearly the patient is in the hospital. i'm right there. i have nurses taking care of me. or they might go to a dedicated

observation status unit. right now we have about one third of these emergency rooms have created the observation status unit with pretty elaborate clinical protocols to do that. so why is this an issue? it's been around for a while. it's not like it happened last year so why is it an issue? it has a lot of attention because of the rapid growth and there have been reports in the media that have talked about this why is it escalating into so many patients being turned observation status right now and it's gotten attention on the court. we will hear more about that certainly during the dialogue with members of the audience and the policymakers. once you are considered an observation status person, you are part of the, medicare part b. you are in outpatient. and if you are under medicare part b., there is no attack on the medicare part b. you are getting tests.

they are observing you and giving blood work and they might do x-rays to determine what is going on. each one of the procedures has a 20% co-pay. it's like elkhart where as opposed to beating a patient. then there is a cap that the patient is responsible for this that keeps going. there is no cap so that is a big problem leading to a financial burden for people which is a big concern to aarp and other consumers of the audience here. the other thing that has gotten a lot of attention on the other part of this is that this time spent as an observation status patient does not count to the consecutive requirement under the cms rules to allow a person to be eligible for medicare payment for a scaled nursing facility visit which can go up

to 100 days so it comes out of pocket not a very serious concern and i know some of the data. if a person happens to know that and that is a big question, do you even know? i've been in this hospital for three or four days but i haven't been in inpatient. if you happen to know that you may forgo a skilled nursing facility visit because you don't have the money to pay for it to be extremely sensitive or you may go, not know that and get to build later so there's lots of controversy around this. it's a serious concern for hospitals, patients, policymakers are grappling with it and our purpose today is to bring the data to this discussion and to bring other voices into the initial discussion and then ended and i would love to have you engaged in the discussion. i also want to mention this is on c-span and we will be taking

questions from the audience. >> more specifically, c-span2. if you are looking for it later it will probably get repeated in the middle of the night. so if you can't sleep tonight you can probably review everything that has gone on. in reviewing what we jus the leo a little housework, housekeepi housekeeping. there obviously are lots of good things in your packet including hard copies of the speakers we will be using and more biographical information then we will be able to share with you upfront. there's also a list of materials to go even beyond the resources that we have reprinted that you can access online at allhealth.org which is our website in case you want to do more background reading. there's going to be a list separate on the alliance website

monday and tuesday. if you are now watching on c-span2 and you have access to a computer, you can get to our website, allhealth.org. and if you click on the briefing notice, you can get to the slidethe slidesthe speakers ared follow along with the folks here in the room. at the appropriate time, those of you in the room will be able to ask questions either by filling out a green card that is in your packet or by going to one of the microphones in the back. try something new for us if you are watching on c-span live. i'm going to get in trouble here if i don't do it right.

tweet a question at the hash tag #observationstatus and we will see if we can do to them in the course of the conversation. there is a blue valuation for in the packet that we very much appreciate you coming out so that we can make these programs that are for you every time we do them. okay let's get to the program. we have turned the panelists today and they love them. so, we want to let the initial presentations get completed and we will save a lot of time to respond to your questions and to allow the speakers to interact with each other. the aforementioned leaves off the senior policy adviser for aarp and a co-author for the research report that suzanne was talking about and you have a copy of that in your materials.

he holds degrees in both nursing and in the law. a pretty unusual combination. in fact he practiced for almost 20 years and continues the clinical nursing practice and he slipped in on the staff of the finance committee as well. so he has got a very well-rounded background for the assignment today which is to walk us through some of the intricacies of the rules and why doewider use has grown over the last few years. thank you very much for being a part of our program today. >> in addition to that great introduction that keith has given tremendous doer to ship of this work and i also want to thank the director of the health team. there's others i'm sure and doctor deborah whitman. all of those were involved in shaping this but this is the person that let it happen. >> i'm just going to summarize some of the key points from the report that should be in the

packet and if not, it is available on the website but first i would like to acknowledge my co-authors. ..

78% in 2009, the blue bars on the top of the graph there were observation followed by in-patient stay. 23% in 2009, the red bar on the bottom on the right there. just to clarify, our definition, included observation both with and without in-patient admission because from observation patients go either way into the hospital or out of observation to home or other destinations. our definition differs from that used by medpac and the inspector general in their reports, both of which counted observation only for those patients in the outpatient setting excluding those observation visits that were followed by in-patient admission. those studies looked at a shorter time period. so, how long to patients typically stay in observation? med guidelines say observation should last for less than 24 hours and only rare or

exceptional cases more than 48 hours. my understanding recent cms rule changes have not formally modified this guidance. from 2001 to 2009, observation only ex-increased for lent of stay, by 48 hours. that is more than 250%. during same period length of stay more than 48 hours for observation followed by inpatient stay, increased by little over 100%. there is a widening gap between length of stay for be r observation only, compared to observation followed by inpatient admission. cms had similar finding observation lasting more than 48 hours grew from 3% to 8% of observation visits or 267% over just five years, 2006 to 2011. we found claims for observation only with the length of stay of less than 12 hours declined by 57% and all inpatient claims during that period declined by

16%. so what's the financial impact of observation on beneficiaries? compared with inpatient admission some beneficiaries pay less, some pay more amount few pay a lot more especially beneficiaries who require care in a skilled nursing facility or snif as i like to call it. importantly only 8% of beneficiaries admitted to a snf with less than three day inpatient stay paid less than full cost of care out-of-pocket. for other 92% medicare paid snf costs totaling $255 million in 2012 according to a july 2013 memo by the inspector general. while the ig wants to recover these improper payments apparently this has been happening for many years. the impact of observation is uncertain on quality of care and

patient experience especially for observation stays we simply lack good data on the effects. i think carol levine will talk more about this. so what factors are driving these trend? non-clinical factors. medicare payment policy changes. increased scrutiny. audits, denials of short inpatient stays. there are efficiency advantages. it is quicker to triage from the emergency room to observation, thus observation can reduce e.r. crowding and allow fewer ambulance diversions. there is increased reporting. since medicare won't pay for extra, won't pay extra for observation visits lasting more than 48 hours, many hospitals used to truncate their reporting time and observation but more recently hospitals modified their billing systems to report the full duration of long observation visits. diagnosis and case mix we looked at but those changes do not appear likely to account for growth in the use of

observation. since readmission penalties were started in 2012, observation is not counted as a an admission or readmission. so these penalties may continue to drive up the future growth of observation. over the effect of readmission penalties is not reflected in our data which ended in 2009. so our conclusions from our findings ? including use of observation is not a temporary, short term or recent trend. rapid rise in observation rates as questions, concerns that it is becoming a substitute for inpatient admission. increasing observation is driven by non-clinical factors. there's a questionable clinical benefit from long stay observations. uncertain impact of oggs vision on quality of care and questionable impact on the patient experience. implications? observation affects relatively few but increasing number of medicare beneficiaries. most pay less out-of-pocket in

observation than if they were admitted and had to pay the inpatient deductible which is almost $1200 in 2013. a few beneficiaries incur very high out-of-pocket costs due to outpatient cost sharing. susan described and non-covered snf admissions. a few beneficiaries don't get needed snf care due to non-coverage associated with a three-day prior stay requirement. in our findings we found 30% of beneficiaries who were discharged from observation and theoretically sent to a snf did not appear to get admitted to the snf. thighs findings were not in the report. for those affected financial impacts can be substantial and potentially catastrophic. the inspector general found beneficiary who is require care in snfs that was not covered by medicare were liable for over $10,000 in out-of-pocket costs. admittedly this was a small number of beneficiaries, about

2100 in 2012. apparently medicare paid for all but $22 million of these snf costs according to the ig. under the circumstances it would seem appropriate for policymakers to consider options to address concerns raised by increased use of observation, in particular policies that could reduce the financial impact upon beneficiaries. so, we recommended several approach that is could address these concerns including eliminate the three-day prior stay requirement for care in a skilled nursing facility. i would note that prior inpatient stay is not required for coverage of other post-acute services such as inpatient rehab facility, long-term care hospitals and home health care. i also note that the three-day stay rule was repealed in 1988 by medicare catastrophic but reinstated in 1989 when catastrophic was repealed. it would appear that the effect of a rule change like this on medicare spending would be minimal because medicare's already paying all but

$22 million of these costs according to the ig. until then at least credit time spent in observation toward the three-day stay requirement. i would add that since our report focused primarily on observation, some of these policy options may require further refinement. for instance, my understanding that massachusetts has applied for a waiver of the three-day stay rule to test the impact of allowing snf admissions from the community for certain high-risk beneficiaries. so just highlight the increasing impact of the three-day stay rule i wanted to focus briefly how medicare's inpatient length ever stay has been falling. when the three-day stay rule was adopted in 1965, medicare's inpatient length of stay was about 13 days. by 2010, the inpatient length of stay had fallen to 5.4 days. more than a third of beneficiaries with an inpatient admission had a length of stay less than three days. shorter inpatient stays have

resulted in patients being discharged quicker and sicker. this is increased the need for post-acute care in skilled nursing facilities and other post-acute settings. at the same time it is becoming increasingly difficult for patients to satisfy the three-day stay requirement. so finally some additional recommendations we put forth include impose a cap on beneficiary liability for observation at the inpatient deductible level. this would limit the maximum financial burden for observation to the amount beneficiary was incur for an inpatient admission. count observation as an admission for purposes of readmission penalty. this would strengthen provider incentives to reduce avoidable admissions and reduce potential gaming close as loophole that may encourage inappropriate use of be a vision to avoid penalties. clarify medicare criteria for observation versus inpatient status. this would reduce provider confusion and potential misuse

of observation associated with non-clinical considerations. i think mark will talk more about this. notify patients of their status when they're in observation and its potential impact on their out-of-pocket costs. this might reduce beneficiary confusion about whether later snf care will be covered by medicare. thanks for your attention and i think ed wants to hold the questions until after the panel's finished. >> except for ed's question. >> go ahead. >> just a clarification, you said, keith, that it was quicker to triage from an e.r. to observation status. why is that? >> basically because you don't have to move the patient. but you can, you can move them to a different bed or a different unit. you can decide what it do and move somebody or not as needed. it's just, it can be done in the e.r. you don't have to go through an admitting process the admitting process itself takes

time. it requires an admitting physician where as the e.r. doc can handle disposition of a observation patient. >> and maybe it requires a bed that isn't available too? >> well that maybe just requires moving the stretcher. could be either one. i would just point out that observation is not considered appropriate for postoperative care. so in your case i don't think you will be in observation but be that as it may. >> okay. i'll keep you posted. by the way the ig report that keith was referring to is in your packets i believe. it's a lovely shade of orange. to help you find it. we've heard about mark heart stein from keith a couple times. now we'll turn and hear from mark. he has been with the centers for medicare and medicaid services for more than 20 years. he has worked mainly on medicare

physician and hospital payment issues. he now directs the hospital and ambulatory policy group at cms which is a big deal. the four divisions he manages set payments for over $260 billion of medicare expenditures to over 900,000 medicare beneficiaries. i'm sorry, 900,000 medicare providers. he has been involved in recent cms rule making on observation status and we're very lucky to have him here to tell us about that work and other aspects of it. >> well, thank you very much, ed. it is very much a pleasure to be here. i appreciate that kind introduction. i'm always trying to impress by 13-year-old daughter with what i do at work. i'm going home tonight and say i was on tv today. and she's going to say, what were you on? i'm going to say c-span? actually c-span2.

she is going to say, well, c-span2. so i guess before i start making my remarks i want to just clarify one thing and this is, this is kind of like the issue. and i may have given up on this but there is really no such thing as in medicare parlance, there is no such things as observations status. observation is knot a status. observation is a set of services. outpatient is what the status is. kind of like when people say i'm literally out of this world. what they really mean i'm figuratively out of this world but people have always used it modifier literally to describe something that when they really mean figuratively. i understand literally has now become figuratively. i will give up on observation status. maybe not yet since i'ming it here today but observation is a set of services. the patient's status is

outpatient and that observation services are used to determine whether the patient need to be admitted to the hospital for inpatient care or whether they can be satisfactorily discharged to another setting. whether that be home, skilled nursing facility, home health care, rye habitation facility or some other type of patient care setting. so really the purpose of obsis to make a determination whether the patient needs further care on inpatient basis or whether that patient can be treated on an outpatient basis and discharged. i will give a little bit of history here because i think this is relevant to why this is an issue now versus in the past. so from 1965 to 1983 medicare paid for inpatient hospital services the hospital, medicare's share of hospital reasonable costs. what that meant that hospitals have these very sophisticated documents called cost reports. they accumulate cost in

different cost centers for those cost reports. we figured out what medicare's share of those costs were sand that's what we paid them. from 1983 to present we paid them on inpatient system. inpatient hospital deductible and three-day prior hospitalization was mentioned couple times so i will mention it here. you need to have a three-day prior hospitalization in order to be eligible for skilled nursing facility services there is actually inpatient coinsurance but it doesn't happen until after day 60. i don't think it is really relevant for this discussion. the same for outpatient hospital services from the beginning of the medicare program until 2000. again, hospitals accumulated their costs in a cost report and medicare paid the, medicare's share of the hospital's reasonable costs. it didn't really matter whether the patient was admitted treated inpatient or the patient was treated on an outpatient basis of the at least to how medicare made its payments. it did have relevance to beneficiary liability because they have inpatient benefit

days, inpatient deductible, versus the outpatient part b deductible but with respect to how medicare paid the hospital was really indifferent because it would get medicare's share of its reasonable costs. from 2000 to present, the outpatient side we've been paying based on perspective payment system as well. now this is a, this is a very important distinction because if you're admitted to the patient, if you're admit hospital the patient gets paid on the patient services get paid under the inpatient hospital perspective payment system. if a patient is not admitted they get paid unthe outpatient hospital perspective payment system and that can have an important distinction how the hospital is paid. there is coinsurance for each service after the part b dedoublingable is met. each individual service is capped at inpatient deductible although the total coinsurance when you add up collectively all the services the patient receives in the outpatient department could be more than the inpatient die duckable. time as outpatient does not count toward the three day prior hospitalization for skilled

nursing facility services. so the inpatient admin decision, i put this slide up because this is the really the critical guidance for making that determination whether a patient is determined by a physician to be an inpatient. i'll just read through it. inpatient is person who has been admitted to a hospital for bed occupancy for purposes of receiving inpatient hospital services. generally a patient is considered inpatient if formally admitted there. is inpatient order as an inpatient with the expectation that he or she will remain at least overnight and occupy a bed. the rest of this sis irrespective actually whether they occupy the bid or not. physicians should use 24 hour period. that gets to the point you're saying. could be the patient doesn't ever reach a hospital bed. they may, may not abed available. the patient may pass, may, be trited effectively without actually getting to an inpatient bed or could be a variety of other circumstances. physicians should use a 24 hour

benchmark order admission for patients expected to need hospital care overnight or 24 hours. the decision to admit is a complex medical judgment. so there is emphasis on the physician decision here. factors leading to long stay outpatient cases, thighs were issues that were previously mentioned. in recent years there have been a lot of attention paid on the error rate, the comprehensive error rate testing program and a finding there's been a high rate of incorrect short stay admissions to patients may have been in the hospital overnight or one day or same day admission and discharge and upon review a contractor looked at those and said those stays could have reasonably been treated as outpatient, not patient did not need to be admitted that of course is been widely reported in the press as suggestion that medicare has a high rate of, high error rate. in other words, we're paying incorrectly for a high percentage of the dollars that we pay out inpatient admission is very expensive. so that will account for a significant portion of the error

rate. recovery audit contractors in the past several years. recovery audit contractor program has been in place. these are contractors who review medicare payments, not just inpatient cases but of course inpatient cases are high-dollar cases. they receive a fee based on a percentage of their recovered incorrect payments. so there have been a lot more scrutiny of inpatient hospital admissions in recent years than there were previously. at same time, that there has been a larger focus on review of inpatient admissions and many more denials of inpatient admissions there became realization that longstanding policies really never have been paid much attention to actually have important implications. that is limited hospital rebilling for denied admissions. so prior to march 2013 hospitals were only able to bill for part b ancillary service, and only within timely filing lits. so they were only really able to bill for a limited list of diagnostic services an if more

than a year had, lapsed since the date of service they were unable to bill for anything at all. so the hospital's were concerned that they have provided medically necessary services to the patient and there was no dispute or argument about that however they were unable to bill for any of those services because they were beyond timely filing or our regulations only allowed them to bill for these inpatient ancillary or diagnostic services. what was the response to that? longer beneficiary stays as outpatients as is already been indicated and reason for this conference. a lot of concern about the time as long-stay outpatients does not count toward the three-day prior hospitalization for skilled nursing facility care. charges, coinsurance for part b outpatient. i think we've also heard, nobody i think has mentioned but if the beneficiary receives self-administered drugs in the outpatient department, there are actually no benefit under the outpatient perspective payment

system for those drugs. and the beneficiary may be liable. as is already been stated the patient may be unaware he or she is an outpatient and then what has happened is hospitals really with no recourse for getting payment have, have decided to adopt, i'm sorry, appeal those inpatient denials because they really had no other way of getting payment and they also have, had a lawsuit begins the secretary of health and human services challenging our part b rebilling policy which limited them to only the ancillary services. the administrative appeals process has ended up referring some of those inpatient denials, upholding the inpatient denial but referring those cases back for medicare payment under part-b which we did not think was consistent with our regulation and it has been followed by tens of thousands of hospitals appeals seeking either part h after or part-b payment. we did an administrator ruling earlier this year to try to take

some of these issues off the table. we basically said where there were appeal rights pending on those case as hospital could rebill for all part hb inpatient services medically necessary, not limiting them to the diagnostic services or ancillary services they were previously limited to. we suspended the timely filing rules and gave them the opportunity to bill those within a certain period of time of aadjudication of the appeal. in addition to that we tried to address this issue going forward in the inpatient hospital rule by allowing hospital, essentially changing the rule on part b rebilling to allow hospitals to bill for all part b services within year of the date of service following inpatient denial or self-audit. this is actually a very important provision as well. at the reason it is important is if the patient is admitted to the hospital he can not change the patient's status back to outpatient unless you go through a complex process to put a condition code on the claim and

the hospitals have said that is very burdensome. once the patient is discharged, you can't change the patient's status back to outpatient. so the only service that is you would be able to bill for would be part b inpatient services by extending the list of part b inpatient services to all services not just the limited ancillary services, hospital can do what is called self-audit. without changing the patient's status they can bill for all the service that is otherwise would have been payable under medicare part b, even after the patient has been discharged from the hospital. one of the things i want to say here the patient's status remains inpatient and reason we did that to protect the beneficiary rights to skilled nursing facility care. as already stated, beneficiary requires a three-day prior hospitalization in order to receive skilled nursing facility care. ion if the stay is not medically necessary, as long as admission to skilled nursing facility care was not a departure from normal medical judgment, normal medical practice, the patient's skilled

nursing facility stay can be paid. however, if the patient doesn't have inpatient status it can not be paid and then two midnight rule is my last slide. i will go over this quickly. again this is try to provide more clarity and guidance to hospitals regarding when patients should be admitted to the hospital and we're hoping that this reduces the need for lengthy observation. lengthy stay in the hospital, outpatient department, receiving observation services. the physician must order inpatient admission. we put that in the regulation. that has been longstanding policy. hospital time prior to the formal admission following the inpatient order does not count toward the three-day prior hospitalization. that is consistent with what has been our longstanding policy. and then the two midnight rule is, if a patient is expected to be in the hospital more than two midnights the hospital can go ahead and admit that patient there will be presumption of medical necessity that the

inpatient stay was medically reasonable and necessary. take for instance the patient has one night of observation. if the physician still can't make a determination as to whether that patient should be admitted or discharged think can go, and want to keep that patient another night they would meet the two midnight presumption, two midnight benchmark, the physician can go ahead and admit that patient and there will be presumption of medical necessity. we're counting outpatient and inparity time towards the two midnight benchmark. exceptions to the two midnight policy. inpatient only procedures. procedures likes cabbaging coronary arteries, bypass, can not be provided on any other basis except inpatient base basis. if the parity left against medical advice. there may be rare unusual circumstances where the physician expects patient to stay less than two midnights but still patient level of care is necessary. i gone over time. i apologize to my co-presenters but i still think we have plenty of time for q&a.

>> terrific. thank you very much, marc. linda does not have slides? >> yes i do. >> go on to -- i'm sorry. you are correct. >> save the best for last. >> that's right. well -- we're going to turn, as linda fishman has told you, and i should have, to carol levine. carol directs the families and health care project of the united hospital fund which is a new york city-based non-profit. the project focuses on developing partnerships between health care professionals and family caregivers, especially during transitions in health care settings. she has won, and i commend to you the biographical sketch in the materials a trophy case full of awards for her work including

a mccart thursday foundation -- mcarthur fellowship for her work in aids policy and ethics in 1993. we asked her to look back on patient observation in the current status. carol, thank you very much for being with us. >> thank you. that, ed, since you mentioned family caregiver, ed. a little bit of advice. take a family member with you when you go for your surgery. and make sure that you're okay before they let you go. i called this talk, once upon two midnights dreary with apologies to edgar allan poe but it seemed appropriate. i wanted to ask, my basic question are observation status and two midnight rule patient and family centered? because that is the buzzwords these days. we want everything to be patient and family centered or person

and family centered. i want you to try to think for the older people of my age in the audience, going to the hospital and for you younger folks going with your mother or your grandmother or grandfather and think about what it means to go to the hospital, to the ed. the person, either you or the person you're accompanying is sick. they wouldn't be there. otherwise they're in pain and they're frightened. you as the family member are worried. you want to know what is going to happen. want to find out what's wrong. so this is a highly stressful, anxiety-producing situation and i think, you know, put that, keep that background, that context in mind because it's about rules and it's about money but it's also about how a person feels in this situation. so, you're in the ed and happen to be in new york city where i'm from and you're there for quite

a while. as i know, i accompanied my sister for 2 1/2 day stay in the emergency department where she was moved several times but from one corridor to the next, not even a little good place with a curtain. so, you may be moved to a bed or the regular unit. and, the person, appears to be getting regular hospital care as had been described. and you think mistakenly that medicare will cover the entire hospital stay. and the point of this is that when you're in this very anxiety-producing situation you real hi should not be worrying about the money part of it. that should be when you have insurance like medicare, make other supplemental insurance, some hue that should not be the uppermost thing in your mind. at least in my view. zoo, part of this situation of

being in the hospital is, dealing with the hospital staff and it is not your regular doctor who is going to be there. likely it will be a hospitallist who is in charge of the hospital care who is probably very likely never seen seen the patient before and may not even be the same hospitallist if you're there over the second midnight. so even if you're told, which is not necessarily going to happen, we're keeping you for observation, you don't know what that means. now new york city state has passed a law that requires informing patient of their status as of january 2014. . .

or it could be something really, really bad. this is a really bad environment for communication, and that should be the focus of -- the care should be the focus, not the payment. now, as i understand, and i would be happy to have clear indication remarks were others there is no way to challenge this decision that you are not in inpatient but you are an outpatient. it is a quality improvement organization in new york state and asked what a medicare beneficiary or family member could do to appeal that decision and she said the decision for

observation can't be appealed. what you can do, she said, is to file a regular complaints about the quality of care. so if you could make a case getting this group of services denied you the best quality of care that would be a common point but -- complained. but to say i don't want to be observation status i want to be in inpatient, that won't work. at least that's my understanding. okay. we went over all of this so i'm not going to repeat. but i do think the prescription drug part the self-administered drugs these are not like over-the-counter drugs these are prescription drugs that you take home and are important for the conditions which are probably not why you are in the hospital but those are hospitals won't let you bring from home and linda make clear if i got.

that can be a big issue for people not just the payment but how do you get them. and as we have heard the post hospital financial burden is where the really big money comes up. the alternative of going for rehab is they say you can get rehab at home and get a doctor's prescription and you can get services. it's not an equal alternative, i don't think. at least not in my experience in high-tech experience with both inpatient rehab and rehab at home. it's not as intensive as at-hom, it probably won't last as long. it will be a few times a week. it won't be every day. transportation if you are going to an outpatient clinic would be expensive. and that there is no personal care that goes along with this

which may be necessary based on that person's condition. so, again, families filling the gaps and try to handle all of the extra things that need to be done. so there is an impact beyond the financial that i think needs to be considered. as it has been said, we don't have any data that i know of on outcomes and readmissions because the observations of the patients were never admitted. we don't know what happened to them at least to my knowledge. i think -- and this is a speculation that some people may interpret observation status as an indication that their health problems are not so serious. they are just going to watch me for a day? that isn't so bad. if i were really sick i would be admitted. so they might think that they are not getting the full

attention. it's not necessarily true but that's the way people may think. they may stay for observation services why should i risk paying extra because you don't know what that charge might be. it might be less or it might be more. so if people are really -- they go home and they get sick because they have not stayed with because they didn't get admitted and then they are really admitted because it is likely that the condition has worsened. so i think that is something that needs to be looked at. also, the lack of rehab may lead to a functional decline. the need for more services, or costly services. so i don't think that we can look only at the immediate hospital period and the decision to go here or there. it's the trajectory and when

people with many chronic conditions, it's always you know, what happens here. it's an episode but then what happens down the line. and i think we need to have more information to follow these people. so, my original question i offer on the statuses i would say not so much. thank you. >> thank you very much, carol. linda fishman is the final speaker in the lineup. she's the senior vice president of public policy analysis and development for the american hospital association. she came to aha from cms if you don't mind the acronyms. before that service on the staff of the senate finance committee, i don't know if you were there at the same time, linda

basically has had a big hand in almost every piece of medicare legislation for the last generation so we are very pleased to have you. [laughter] >> she didn't like that. >> you are personally being held responsible for the good and the bad. but today we've asked you to lay out some of the challenges to the hospital segment income for me to this recent medicare rule that mark told us about and what the impact might be of the changes to that rule. linda, thank you very much for being willing to join us here. >> thank you, ed -- [inaudible] >> let it go. >> hello? okay. thank you. i'm really happy to be here today to talk about hospital response to the midnight rule and i must say mark did a very thorough job of going over the history and the rules to which

hospitals are responding at this point. but i could also see a number of faces in the audience who were a little bit overwhelmed at the pace at which mark talked about what's called the midnight rule. and what i would like to do is maybe keep that a part of little bit and talke talk about how hos are reacting to the recent policy change. okay. so, i would like to backup a little bit and talk about the history of how we got to where we are from the hospital's perspective. about two years ago, my boss received a letter from maryland, the administrator for the center for medicare and medicaid services notifying us about the explosion in the number of observation days and the number of patients receiving observation services and said, you know, do you have any notion

of why this is occurring? and we asked our members through our policy process about what the problem was if in fact it was a problem. virtually every one of about 400 hospital leaders raised their hand at this meeting that we have and said yes observation is really increasing our hospitals. about 2013 there was a proposal in one of the cms rules that laid out options and instead we really are concerned about the increase in the number of observation days and what does the hospital community as well as other providers think about four different options. one was a time-based criterion that basically wha would set the defined observation within the span of say 24 to 48 hours. a second option was to define

observation around a specific clinical criteria such as for example what is used by hospitals to define certain clinical conditions. of the thirthe third option wasr authorization for an admission to a hospital, which as we all know would be very resource intensive with respect to the entire medicare beneficiary population. and then finally, the agency thought about a proposed payment solution. and our members didn't like any of these options frankly when we asked them. and the least worst option was the time-based criterion. that's pretty much everyone agrees that a payment solution would certainly go a long way to helping reduce the length of the number of observation status.

at the same time -- and mark talked about this while -- the recovery audit contractors have really colored the situation with their review of improper payments. and as he said, they work on a contingency basis. hospitals have really sat up and taken notice about the lax behavior and i will use that acronym. they've been the 19 payments for claims particularly for short stays, independent of the need for medical necessity. and it turned out that a lot of our hospitals -- many of our hospitals would appeal these rac decisions for a few reasons i will go into in a minute. and over all the statistics show that our hospitals when on about three quarters of all the cases that they appeal to the administrative judges. and i think mark referred to the

fact that cms and the laj's are drowning in the number of appeals. he also talked a little bit about the cert rate and the need for clarity from the field in terms of the status of observation. the result is the two midnight rule as he mentioned and it's based on basically two concepts. one is something he referred to as the benchmark. and that is whether or not a hospital gets an inpatient payment for a particular claim. that is an inpatient admission is appropriate if the physician expects the patient to stay in the hospital more than one medicare utilization day, which is defined as spamming two midnight. of course the physician must document that of the services were medically necessary for the patient to be there.

the second concept is the presumption, and that involves the definition that any state that spans two midnight or is called an inpatient only list is reasonable and necessary and should not be subject to the medical review unless there is systematic evidence of gaming or improper behavior on the part of a particular provider for notice of the presumption was to remove from rac review, if you will, a number of those claims, as long as they span two midnights. because i'the perception was the will not have a contractor review those claims. well, the rule came out with respect to hospitals on octobe october 1, and i would have to say that the field is generally very unhappy with this rule. there are some hospitals who have said it could be very

helpful, but many of the hospitals are not terribly happy with having to implement it. however, i would like to point out that there are a number of things in the rule that are very positive that cms has said. and they represent an improvement. first of all, a member of our places have said that applying the two midnights presumption meaning not looking at the medical review of that particular set of claims will be very helpful. for purposes of the two midnights benchmark, starting the clock in terms of what defines the two midnights will begin when the first outpatient service is delivered. previously in the proposed rule the agency had said it would be when the patient is first moved to a bed. this is an improvement. observation time in the emergency services towards the

two midnights benchmark but it doethat itdoes not for purposese three-day stay. third, physician judgment and a patients complex medical factors are something that cms says it should look at and that's been a long-standing policy, but to our knowledge, cms has never specifically told the rac that they were going to enforce that standing policy. and so we were pleased to see that. and then finally, rac is able to take a look back up to three years with respect to claim and assess the claim. what cms has told these rac contractors to do is only consider the amount, the level of information that was available to the admitting practitioner after the time of the patients physicians to the hospital so those are all very

positive aspects. the other little wrinkle that happened is that cms decreased the hospital inpatient update as a result of 40,000 cases moving from the outpatient setting to the more expensive inpatient setting. our update for the prospective payment crisis was cut by .2 percentage points or about $220 million to offset that additional spending. we have looked at the office of the actuary's assessment. that's who did the analysis and we don't particularly agree with any of the assumptions that were made. and the model is very sensitive to those assumptions. on the positions to date, the rule as i said was effective as of october 1 and guidance on how to implement the rule didn't really come out until around

september 5 around the physician order and certification requirements. and at that time, the guidance was somewhat conflicting and difficult to understand. four days before october 1, on september 26, the agency issued frequently asked questions and at that time extended a transition. for which the agency would not apply the policy that woul but t tells medicare administrative contractors which were different from iraq to do probe and educate audits of hospitals and a certain amount of claim would be pulled from every hospital and looked at with the intent of educating the hospital on how to implement the policy. what we have heard from our hospitals is that this two midnights rule is difficult to implement and will take a lot of time to do.

some of the reasons you see before you. there is vast education needed throughout a hospital. you have to educate all the different departments from nurses, physicians, utilization reviewer's and the like. electronic medical record systems need to be changed to accommodate these new policies as well as the workflow processes for how the work gets done. and we will take questions about that later. in terms of the physician impact of the delay that currently exists, on november 1, the agency extended its enforcement of delay for yet another 90 days. and so we are in a holding pattern if you will wear the role is being implemented, but rac isn't looking at those claims until april 1, 2014 as

the hospital's attempt to implement the rule. we feel that we need an additional six months in order to fully and women to the rule and accommodates to all of those reasons you saw on the slide before. and at the same time, we are asking the agency to consider the implementation or the proposal of a payment solution that would address observation in particular in the payment system. the reason i say that is the payment for a particular service on the drg side or the inpatient side is much higher than it is on the outpatient side, and the notion would be a payment for observation service would be somewhere in between, which would be very helpful to the hospitals. finally, i was asked to speak about the amicus brief that the

aha filed some time ago with respect to a case that was filed by the center for a daycare advocacy of national senior citizens law center. we filed this brief not to take a position per se. and this case is somewhat related to the three-day stay as i understand it. we did not take a position on the three-day stay, but we wanted to explain to the courts to difficult positions of hospitals and physicians are in with respect to the observation status and the precedent use of the observation status and of the unhappiness of the beneficiaries with respect to that status compared to the pressure that we are feeling from the recovery audit contract first and even from the department of justice who has in the recent past looked at these

types of payments with the notion of by evasion of a false claims act which is a very serious violation and so i just wanted to offer that as something that is available. we continue to pursue among all avenues with respect to our advocacy on this rule from the other regulatory perspective we continue to meet about the implementation of the rule and encouraging the development of more guidance. we are talking to people in the congress about a legislative remedy with respect to the delay of implementation of the rule to get us that additional six months and we are also exploring legal avenues with the agency as well. so with that i know i read over my time. thank you, ed.

>> thank you, linda. i have to tell you that i'm not a poor country lawyer. i'm a poor small town hardly ever practiced lawyer, and a lot of this stuff is very hard to digest if you haven't been immersed in it for the last couple of years. so now you get a chance to try to help us interpret it by asking penetrating and well worded questions either by going to one of the microphones in the back, writing your question on the green card that's in your packet or if you are in the audience provided to us by c-span, you can tweet your question to #observationstatus. let me if i can if you can bear

with me for just a second if i can pursue a factor that has been mentioned by several of our panelists, and that is the role of the physician in all of this. presumably, the physician admits or doesn't admit. should we have had a physician could be very hospital or family doctor or somebody like that on this panel what is the rule that each of you are some o or some u anyway would like to comment on of the physician in this controversy? >> i just want to say we did try to get a physician on this, the chief medical officer from the robert wood johnson university hospital where i serve on the board to be in total honesty area because we have a lot of experience but he also had to take care of patients today. so he did share some thoughts and are there any physicians in the house? very good. so we have some physicians in the house that mean he would like to respond to that.

but this notion that carol raised and then linda, too, about this tug of war and this includes nurse practitioners and physician's assistants to my understanding getting involved in this, too. we want to admit the person and we understand that this is great to be a financial burden and clinically this person should be in admission, but it's going to be challenged and there will be financial ramifications for the hospital and one of the things i will add and maybe a physician can say something about this that the physician payment is not effective. maybe it's like $5 less. whether you are an advocate patient or an observation patient. so there isn't any particular financial incentives to try to spend the extra time, the paperwork, the burdens it takes to make this documentation stick so that's the feedback i get

from a really talented and caring physician. but i welcome any physicians in the audience to respond as well. well. well. >> you wanted to add something? >> but we have heard from the hospitals who talked to their tr physicians obviously is that physicians are very reluctant to attest that this person will be staying in the hospital for more than two midnights so there's a certain pressure and reluctance for physicians to want to sign that order and become responsible for that policy recognizing that there are those pressures with respect to the medicare auditors looking over our shoulder. >> i would also like to comment on the role of the physician and

one of my slides i had to put some emphasis on the decision to admit a patient as a complex medical judgment and that's not changed. linda mentioned that in 2012 and 2013 outpatient rule, one of the things we did is ask the hospital community and the public interested in commenting on the rules on for potential options, and i think it was pretty clear the information that came back to us from the public comment a if they didn't want us to remove the role of the physician in making a judgment about whether that patient needs to be treated on an inpatient or outpatient basis. in carroll's presentation she talked about whether any of these policies are patient friendly. and i think in our view or at least from the public comments that we read i think the concern about the time-based decisions and the concern about criteria

and i guess even probably prior authorization is that that really removes the physician for making that determination and determination as to whether the patient should be inpatient or outpatient. so just really want to focus on that part of the policy. it was not a part of the policy people like when we suggested. i do think it's not randomly to take the position out of that judgment and we decided to retain it in developing the two midnights policy. >> all right. i believe you were first and i would ask those of you coming to the microphones to identify yourselves and your affiliation and try to keep your questions as brief as we can so we can get to as many questions as we can. >> national center for public policy research. i was curious once a patient has been admitted as an inpatient, do hospitals have any incentive not to admitted into a skilled

nursing facility is there any financial incentive that's affecting us that way? that was my only question. >> it's hard to see the little light behind the microphone. no, not to my knowledge. you know, i think that hospitals especially now, given the affordable care act, are very much focused on smoothing out transitions and transferring the patient to the appropriate setting post-inpatient stay and i don't think whether it's a skilled nursing facility or inpatient rehab center or home there is any financial incentive to go anywhere. >> i'm from the college of emergency physicians in first i want to compliment you all in a

handling and trying to pull apart is incredibly technical tl issue and i think it's super confusing, but two midnights, the three-day stay. since you brought up the issue of the physicians i just want to make a mentioned that emergency physicians to a large extent make a decision about the admissions for many medicare patients. however, they don't really take on the role of admitting physicians per se because most emergency physicians do not have admitting privileges and their hospitals and really don't want them because they don't want that responsibility for what happens once the patient leaves the emergency department. one of the other things i wanted to mention is there's a couple of things in your packet about the short stay observation dedicated protocol driven unit of which many of the members are very interested in and i think this question may be for you, linda. what do you think about more

hospitals getting involved in those short stay clinical decision units as opposed to the longer stay on the hospital floor as where i think a lot of the confusion and financial upset arises. >> we haven't really looked at it from the age perspective, but it sounds like a very promising idea and worth looking at. >> i would just like to add i think there are some articles in the health affairs they had a particularly good analysis to this and i would encourage you to do that. >> go ahead. >> i would just mention that we did address that issue in the report, so those articles found that short stays, 12 to 24 hours actually can improve efficiency and have quality outcomes that are comparable to the inpatient

admission to cause they are protocol driven so there i there than one kind of observation status out there. some of them -- but none of them looked at long stays more than 48 hours and there are some hospitals that use protocols and some that don't or have dedicated units into some that don't. so your experience and observation can be different depending on where you land. that is just an observation so to speak. [laughter] >> i'm doctor carolini am doctoi have a physician so i would like to answer some of your questions. i should say i'm also an attorney and i'm involved in a best claims act case that involves some of these things. there are two things that haven't been mentioned that are critical in the decision to admit or to discharge. one of them is to admit to the

patient really has to need services that can only be provided in a hospital, like iv medications or some kind of very close monitoring, near a logical checks every four hours or something like that. if you can give them an antibiotic pill, in theory you should be able to discharge them. what is also involved is something that we touch on from time to time in these briefings and that is the social determined health and patient situation at home. there are patients -- if you know they are capable of getting good outpatient follow-up and is going home with a caregiver capable of taking care of them then it's easier to send home the patient who really doesn't need to be in the hospital and for whom the hospital is in fact

dangerous. and a lot of people don't have that. you get an elderly person whose a little mixed up, they are brought in by ambulance, when you can't send them home and they are not really appropriate for admission so your cost. it's wrong to admit them and it's wrong to send them home. maybe what we need are the type of arrangements where you could call on community services to monitor the patient at home. and that's of course you can't address that in a cms situation. but those are the kind of things doctors have to think about all the time. >> thank you very much. yes, go right ahead. >> marcia greenfield from leading age and we are part of a very large coalition of advocacy consumer groups a ranging from

aarp to the center for medicare advocacy, whole group, 20 groups that have come together to support addressing one of the issues that you have so effectively raise today and that is the issue of the fact that observation status doesn't count towards the three-day stay requirements and we have been supporting as at 126 members of the house both republicans and democrats and 25 to 26 members of the senate legislation that would basically count all of those towards the three-day stay requirements, and that is hr 1179 in 569. so we leave the leave -- we leave the quandary of the doctors and hospitals and patients face that we do think that there is a simple way of resolving at least that one point which is the availability to access benefits. so i want to mention that for your benefit. >> thank you.

>> yes. go ahead. >> i'm a practicing emergency physician and i work in the office of congressman john dingell in the house. this is i am sure everyone appreciates a complex issue with no easy answers. i can tell you one of the main problems is that we traditionally have two options either in the emergency department or the hospital and there is more granular patients that fit somewhere in the middle and i think most of us appreciate cms has tried to help the clarity of the situation. the timeliness criteria unfortunately gets a bit in between the patient and the physician and that really does i think to one of the main reasons why so many of the -- so many are billed as observation services is because it's the hospital at the end of the admission determines that this admission may be challenges the rac audit. so the emergency physician advocate of the patient or the inpatient physician who's taking care of the patient doesn't

necessarily have a huge part to play in the decision to rid the hospital is afraid that they aren't going to get the part a ability. >> before we move on i just wanted to mention the importance of one of the changes that we made in the inpatient final rule and that is to allow hospitals to bill for all part of the services that are medically necessary when the patient has been admitted if they decide after the patient has been discharged that the patient should not have been treated on an inpatient basis that is a huge improvement in policy that i don't think i it's at all in controversy. i think the issue that we had previous to the adoption of the rules is if the patient was discharged and the hospital felt like they should not have been admitted and they are likely to get a denial there is no way to get any payment because they were limited to that limited list of ancillary services so

this provides a lot more flexibility to the hospital in a situation where they may not be certain that the patient was appropriately admitted they don't have the financial penalty associated with that decision versus having always treated the patient outpatient and billing under the part of the outpatient services so that really provides hospitals a lot more flexibility if let's say the patient is admitted, the patient is discharged and then the utilization review committee disagreed with the decision so i think this is an important change in policy that hopefully can help improve going forward where we are on this issue. >> i want to follow up if you don't mind because there was a question raised that i think perhaps you can address. you've been saying that the new rule allows more payment of part b. services but the question has come up how does the increase in

the status affected the level of staffing and hospitals? in other words, to me it is a reimbursement question if there are more observation status payments where it's not part a come how does that affect the financial position of a hospital and paying for the adequate nursing staff that has to be there regardless of whether you are part a or b. it's a good question. maybe we don't know the answer to that but thank you for the question. >> one thing that actually is on one of the other question cards come and i think that he may have covered it in the paper. it's not in his presentation but exactly what are we talking about in the difference between a payment to the hospital for an admission versus the average payment for an observation status stay?

>> that's why we have proposed a payment solution because the inpatient payment is often quite a bit larger. it depends on the diagnosis and what you are coming in for obviously. but what you get paid on the inpatient side is much greater than what you get paid on the outpatient side. and i think one of the possible resolutions to this is a payment that's somewhere in the middle, kind of the goldilocks where the porridge is just right. >> do you have anything to add to that? >> under the sequester we have been unable to afford any porridge. [laughter] >> if you'll bear with me there is a question that follows up with my follow-up, and if you want to weigh in, that's fine. the questioner asks has the

distinction between inpatient and outpatient outlived its usefulness? should we be thinking about a more fundamental overhaul of hospital payments were all payments that eliminate the distinction and focus more on the underlining medical condition services needed? >> so you're saying to combine a and b.? >> iem -- i am. i am not unaware there are proposals like that. >> i will hop on the bandwagon there. i think with respect to the three-day stay in some of the kind of crazy rules about where the beneficiaries get care is kind of the foundation of why this is so difficult and complicated and perhaps it is time to look at beneficiary cost

sharing and how the benefit is structured and it's a 1965 design. so one might think about that especially as at least in the hospital field as we move to the new payment methodologies and structures like accountable care organizations and value-based purchasing and those kinds of things i'm not sure if we are going to move to population health i am not sure those kind of silos work in this 21st century. >> i am a pediatric cardiologist and i emphasize because the ideal mostly with medicaid. i did represent cardiologist story. though at times. susan got a question about the nurses is excellent because the nurses are funded by the big charge and although they can get a hospital can get a facility fee for outpatient care, i don't

know if the er can charge that the charge that it's important. my question has to do with the specialists, not the hospitals, not to the er doctor. especially directed to mark it after the fact the hospital decides to treat this as a part b. admission or billing but the specialist has gone up under the impression that the patient was inpatient and said that an inpatient consultation, it's about the same that that's an inpatient bill versus outpatient and they are susceptible to the false claims act. this has been happening with some of these aha out it. -- rac audit. it's not just the hospitals but also the physicians into this kind of non- clarity between should i go out and outpatient or inpatient when it really doesn't matter but it's a label, and am i liable?

i will comment on that and i guess maybe i will comment by starting i remember when we first got our letter from the american medical association on this topic and i thought okay we have the american medical hospital association, aarp, this is a competed issue and we have a lot of people interested in it. and we saw the letter from the ama and its like my goodness we really have a lot of players in this. so we keep getting this question and the issue is a patient will bill for a visit and there are distinctions between services provided in the emergency department, visits that are provided to inpatient and visits that are provided to hospital outpatients. if a physician is seeing a patient that has been admitted to the hospital then it's appropriate for the patient to build a hospital inpatient visit if it is appropriate for the

hospital to build an emergency department visit and if the hospital -- patient is being seen in the hospital it hasn't been admitted and is not in the emergency department it is important for the physician to build a free and outpatient hospital visit. >> if the patient is admitted and the state is later either tonight to buil go apart to be inpatient this is where i see the status remains inpatient and inpatient visit is appropriate. >> the disclosure of the implications of observation status for patients banning the cost sharing is unlimited and what impact admission status. i don't have the law with me.

it's very short and i could send it to anyone who really wants to know my recollection of it i came about. it does say something about the financial implications. it doesn't go very specifically into it. what it does say is that options for appealing, but as i said, i don't think there really are any. so the point of the law was to make people aware. about getting observation services rather than inpatient services. in terms of the actual

regulations about it still hasn't happened as far as i kn know. can the patient's appeal? >> i am not an expert on patient appeal so i'm going a little out of my area of expertise but i was thinking about this as you were giving a presentation, and the way the appeals process normally works is the patient has received a service, a particular service. and then medicare d. nines that service saying that it isn't reasonable and necessary and then the patient can appeal that the denial was unreasonable and unnecessary and there should be payment for that service. what's going on here is the patient is receiving hospital

outpatient services and they would like to receive hospital inpatient services so there hasn't been a denial of the hospital inpatient services there is no appeal of the decision not to admit the patient. if the inpatient come if there is an inpatient admission and the physician admits the patient and then the stay is later denied the patient can appeal the denial saying i should have received inpatient services. they were medically reasonable and necessary. so my limited understanding is the patient cannot appeal a decision not to order or not to do something. >> just to expand on that a little bit, i would agree with that. as illustrated it said that the way this might come up with b. as an observation they get sent to a skilled nursing facility and they say you're not going to be covered or maybe they submit a claim and it is denied, the patient can appeal that claim the title of coverage, but it is

a done deal. the appeal is totally ineffective because they are precluded for coverage because they didn't have a three-day stay. so it is absolutely a catch-22. >> i think that we have our next question expert person who wants to respond to that. >> i'm with the center for medicare advocacy and we represent the plaintiff in the unsuccessful challenge to the observation status. i want to say something about appeals to read it is possible to appeal, but it's after-the-fact. the person have to have gone to a skilled nursing facility and to pay for it and get the level of care medicare would pay for meaning therapy five days a week or skilled nursing seven days a week or a combination of the two. and then when the person gets the medicare summary noticed looks at the part b. because part a is listed separately and has to have two appeals, one of the hospital status because

everything would be listed under part b. and one for the sculptors and facility status. this is quite complicated and very confusing for people. we have a self-help package on the website, medcareadvocacy.org that tells people how to do this. we talk to people every day about this absolutely every day we get calls. and from the patient perspective, this is not a competed issue. somebody is typically in the emergency room and they say you need to stay here, we need to do more for you. so we have had people with emergency surgery, we've had people who were in the hospital 13 days as an outpatient and they say you didn't have a three-day stay. so we are hearing constantly about this problem. probably the simplest way to explain it is one of our clients from connecticut who spoke to the press and said the hospital

said to me your husband is not an inpatient here and she said i said to them then who the hell have i been visiting every day for the last week? he was in a bed. we have had clients who have been an outpatient status and then switch to inpatient status, nothing changed. same bed, nurses, doctors, and wristband. no change. from the patient perspective it's identical. but i just wanted to say one final thing because it's not a question but i want to say this. one of the concerns i have is how much money we are spending to make the decision if somebody should be called an inpatient or outpatient because what cms says in the final rule is that it's identical. people will get whatever they need whether they are inpatient or outpatient. so what do hospitals due? the first thing they do is be criteria that is a proprietary system.

they buy it because that is what the rac uses to evaluate whether people are inpatient or outpatient. so they pay for that. and ththen the hospitals expandr utilization review committee to cause even if a physician says add that my patients to inpatient status, the utilization review committee can reverse it and they do. observation code of 44 they are allowed to reverse the decision. so, we know from the american case management association, which is part of our coalition trying to support a stir courtney blank legislation, we know that they have hired additional staff in the hospitals to help look at the decision that the position is making so that it's been inpatient or outpatient. and the third thing hospitals do is hire outside consultants or nearly executivmerely executiveh resources in philadelphia. so if the hospital doesn't know if the person should be inpatient or outpatient they are supposed to call. they have doctors around the country 24 hours a day talking about whether people should be

inpatient or outpatient. they say on the website is done more than 9 million cases since 1999. that's a lot of money. about $250 a case times 9 million. this is what we are spending money on instead of providing health care to people. we are trying to decide if they should be called, if people should be called inpatient or outpatient. i'm sorry that i don't have a question but i just had to say these things. [applause] i suspect that your question evokes real answers as well. panelists, any reaction to that? >> i have one that just occurred to me. if you are in the hospital as a medicare patient and you are being told -- you are an inpatient and we are going to discharge you tomorrow and it you or your family member says

wait a minute i can to go home yet. i am appealing this discharge. you can get a very quick response. you may have to pay if they deny it, but shouldn't there be some way to apply that same sort of fast expedited decision making so you don't have to wait until you get to the 10,000-dollar bill to appeal it? it just occurred to me that might be something to try. >> we have just a few more minutes and we have lots of cards so i would ask you if you have a question you absolutely have to have asked, you better go to a microphone and if you are not going to a microphone, what you drag out the blue evaluation form and fill it out while we go through these last closing moments? susan, let me just deal with a question here and then we will get to your card.

the questioners as the american hospital association disagrees with cms' analysis that the two midnights rule would lead to 40,000 or inpatient admissions. what does the aha and analysis show, fewer inpatient, and how many fewer? is that a number? >> yeah. guerra out your pencils if you really want to understand this. the 40,000 cases that become inpatient cases are the result of 400,000 observation cases going to be inpatient side. and then you have 360,000 surgical cases going from the inpatient side to the outpatient side. they will be done on an outpatient basis according to the actuary area that the actuary did not look at about

640,000 entities are aware it's not procedural based. they assumed that zero of those cases would go to the outpatient side and that they would all remain in patients and we have a very hard time be leaving that that will be the case. and i would say this. at this point, we do not know yet how this rule will change hospital and physician behavior and we won't know for about another six months to see how hospitals and physicians adapt to this. but the model that the actuary used is extremely sensitive to the assumptions and you can basically get a variety of answers based on where you think that action will occur. but that's how they got to their results and we disagree with those medical cases.

>> just an observation that the inspector general in that memo also disagreed. they didn't think that the two midnights rule would shift from inpatient to outpatient as i recall. >> i think that there's -- spinnaker go ahead. >> emergency physician -- [inaudible] [laughter] >> i stepped over here and had to join. sorry for the confusion. we have been paying the overpaying a long time for outpatient surgical procedures by switching them from inpatient drg to now they wil two now thed as outpatient state. is that one way that we are ultimately making a more equivalent way for the payment? >> it could be. >> thanks for raising it. it's interesting.

this is a timely question and i don't know if anyone has the answers. there is a concern that the reduction program may lead to an increase in observation stays. i think you pointed this out to avoid the penalty. is there any evidence that this is happening and how did the two midnight rule interact with this initiative or samaria? -- scenario? >> as keith pointed out, the aarp analysis stops with the 2009 data and obviously the readmissions program was not in effect until 2012. i think it could be one of the factors that keep people from being admitted to inpatient status, but i also think that hospitals are working on care transitions with a great deal of energy with respect to where

they send people after an inpatient admission. so i think it's -- there are many factors driving how hospitals are behaving with respect to the readmissions program. and i don't know that i can isolate this particular rule. we will have to wait and see what happens. but it's something to watch in the future. >> i agree that the data that has been analyzed on the increasing length of observation really precedes the application of the hospital of readmissions policy and i want to reiterate again that the two midnights is to address the long state stays in the hospital receiving observation services really to assist the hospital and physician taking care of the patient in the hospital outpatient department. if they can't make that

determination within two midnights but the patient continues to need a hospital level of care that physician earlier had mentioned then that is a critical piece of information. if the patient can't be treated anywhere other than a hospital, they need two midnights apostolate care of a physician can safely admit outpatient and the benchmark is mad because they needed the cert in the hospital -- two midnights in the hospital and as long as the patients needed the hospital level of care in the hospital that couldn't be provided elsewhere. so that really is designed to try to address these long stays in observation. and then in addition to that, as i have previously stated, allowing hospitals to bill for the full complement of part b. inpatient services at less risk to the determination as to whether to admit or not so the hospital is in a position where they can advance the hospital but if they are incorrect they

can continue to pay for all of the inpatient and outpatient services to there's not a financial panel he associated but also provide them with improved guidance so that way when they have a patient who's in the hospital who needs two midnights of hospital care they can safely admit that patient and have to worry about a future denial. >> one of our questioners noted that he was dealing mostly with medicaid and not medicare. this questioner wants to know what other programs do with this bundle of issues was the observation status treated under medicaid and private plans? and i might add under medicare advantage plans where the payment is fixed in advance. anybody? this question frequently comes up to me. and i have expertise on medicare and respond